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GENERAL
INSURANCEManish Lotankar
IV Semester
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Definition History of growth of General Insurance in India Growth of general insurance premium Classes of General Insurance
Prospects of further growth in India Important terms used in General Insurance Underwriting and claim procedures
Insurance and Reinsurance Impact of detariffing rates and products Role of Regulator Conclusion
General Insurance Index
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Marine insurance was being practiced in India from the
beginning of 19th century
Offices were established in Kolkatta which was the centre for
East India Company
Fire insurance followed in 1825 at Madras
Swadeshi movement also had its impact on Insurance and
first Indian Company was formed in 1907 Indian Mercantile
Insurance Company
Need to control insurance business was felt by the British
government which introduced the Insurance Act in 1938 and
Insurance Rules in 1939
General Insurance
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Insurance is classified into Life and General
Any insurance other than human lives comes under the
scope of General Insurance
It is preferable to call this as General Insurance instead of
non-life insurance
There is vast scope and the market is trying to cope up with
the demands of the market
Insurance penetration is improving in India and being the
second largest developing economy in the world the scope is
huge
Insurance In India
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Life Insurance business was nationalised in India in the year 1956
General Insurance business was being done by 106 companiesincluding LIC (GI) On May 13th 1971 an ordinance was promulgated taking state control
of general insurance business with custodians in charge In 1972 GI Nationalisation act was passed allowing the formation of
GIC as the holding company and with 4 subsidiaries each having itsHead Office at one metro 1st Jan 1973 GIC and 4 companies were formed taking in them 106
companies and the 4 PSUs were taking care of the general insurance
business in the country till 2000 totally. GIC on its own was also writing
aviation and crop business besides becoming the National & Asian
Reinsure The objective of nationalisation was to spread insurance to nook and
corner of the country and to utilise peoples money for the peoples good
thus uplifting the socio economic condition of the country
Development in 1970
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Surveyors and loss assessors regulations 2000
Third party administrators regulations 2001
Investment regulations 2001
Policy holders interests regulations 2002
Brokers regulations 2002
Corporate Agents regulations 2002
Manner of receipt of premium 2002
Rural sector 2002
Distribution of surplus 2002
Developments since 2000
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Two councils which had been reconstituted lifeinsurance council
Insurance ombudsman had been appointed General insurance council IIISLA has been formed IIBA- Brokers association IIRM- Institute of risk management Intermediaries now allowed-Agents/ corporate agents/
Brokers
Institutes for educating the agents/Brokers have beenformed and passing the examination has been made
mandatory for carrying out insurance business Surveyor licensing is being controlled by Regulator
Insurance councils & Institutes
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General Insurance business done
Sr no. Year In Crores
1 1974 219.99
2 1975 253.75
3 1976 286.51
4 1990 2174.43
5 2000 10272
6 2007 20000
7 2008 4000
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Penetration ( premium as % ofGDP)
United states 4.32
Canada 3.31 UK 3.05
Germany 3.55
Japan 2.30
South Korea 2.89
China 0.61
India 0.54
International comparison
Penetration ( premium as % ofGDP)
United states 1474.4
Canada 700.6 UK 741.5
Germany 913.5
Japan 805.5
South Korea 262.3
China 5.0
India 2.4
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General Insurance
Insurance of property
Insurance of persons
Insurance of liability
Insurance of Interest
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LIFE INSURERS
1. Bajaj Allianz2. Birla sun life
3. HDFC Std life
4. ICICI Prduential
5. ING Vysya
6. LIC
7. Max New York Life
8. Metlife
9. Kotak Mahindra OM
10. SBI Life
11. TATA-AIG Life
12. Reliance Life13. AVIVA life
14. Sahara India life
15. Shri Ram Life
16. Bharti AXA Life
Insurers now licensed by IRDA
GENERAL INSURERS
1. Bajaj Allianz2. ICICI Lombard
3. Iffco-Tokio General Insurance
4. National Insurance
5. New India Assurance Company
6. Oriental Insurance
7. Reliance General Insurance
8. Royal Sundaram Alliance
9. TATA-AIG General
10.United India Insurance
11.Cholamandalam MS General
12.HDFC Chubb General13.Export Credit Guarantee
14.Agriculture Insurance Company
15.Star Health & Allied
16.Sompho/ Shri Ram General/AXA/
Apollo DKV
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Proposer-Insured-Insurer
Risk- Peril Proposal form Sum Insured Premium ( Consideration) Excess ( Deductible) Indemnity Cover note Policy document Endorsement-for effecting changes in the policy
Warranties/ Clauses Conditions Underwriting Renewal Hazard
Terminology used in
General Insurance
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Insurance is a legal agreement entered between Insured
and Insurer due to which due to the consideration, the
Insurer agrees to indemnify the Insured, for the loss or
damage or liability created due an accident which is coveredunder the policy subject to the terms and conditions of the
contract
All insurance policies are subject to the warranties,
conditions and clauses of the policy contract and claims will
be settled accordingly
Basic Principles of
General Insurance
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UTMOST GOOD FAITH- which is embodied in all
insurance contracts and appears in the conditions of the
policy documents.
Since only the Insured who is the owner/possessing the
property he/she needs to declare the details which are to be
considered by the Underwriter. To obtain the requisite
details the Insurer arranges all questions in order in the
proposal form so that he/she knows where to look for the
required details. Material fact is the detail of the risk which
will influence the mind of the Underwriter to accept/reject;
and if to accept the rate /terms at which the risk is to be
accepted.
Duty of disclosure is on the proposer/Insured and if wilful
concealment/ non-disclosure of facts could be established the
claim if any could be denied
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Only the person who has insurable interest can arrange
insurance and seek indemnity due to loss or damage
Insurable interest is defined as legal interest in another
persons life or in the protection of property from injury,loss, destruction or pecuniary damage
By virtue of ownership
Tenant who had leased property
Employers interest on employees lives
Insurable interest
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Insurer is liable for any loss proximately caused by a peril
insured against, but he is not liable for any loss which is not
proximately caused by a peril insured against-Judge Lumb
Proximate cause means the active, efficient cause that sets
in motion a train of events which brings about a result,
without the intervention of any force started and working
actively from a new and independent source
Proximate cause
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Insurance contracts are mostly contracts of indemnity Insured is entitled to obtain the loss amount suffered from
the insurances he had effected on the property He is not to be benefited due the loss/damage
If sum insured is on agreed value basis the loss will besettled on that basis Extent of indemnity will be based on the market value of
the property at the time of occurrence of the event which
caused the loss/damage or destruction
Subrogation and contribution are the corollaries of
indemnity to ensure that the claim settlement follows the
normal indemnity
Indemnity
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Offer and acceptance- Proposal is studied by the Underwriterwho then quotes the premium terms, warranties and conditions
Once accepted by the proposer and premium is paid, the cover
note is issued. Later on policy document is issued.
Alterations/ changes are effected by endorsements Claim is being processed to take into account the salvage,
under-insurance and excess under the policy and many times to
deduct the additional premium for restoring the sum insured to
the original level by charging the additional premium on the claim
amount paid from the date of loss till the date of expiry. Claim will be subject to getting the subrogation rights
preserved against the third parties responsible for making good
the loss and transferring the same to Insurers
Underwriting and claims
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Fire insurance; Reinstatement value
(other than stocks) Market value
Marine insurance : Agreed value
Marine hull insurance: Agreed value
Motor insurance: Insured declared value
Engineering insurance: Present day replacement
value
Misc insurance: Market value
Changes
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Business Interruption insurance Engineering insurance
Liability insurance- CGL Public /Product E & O ( PI) liability insurance D & O liability insurance PI for Lawyers/CAs/Doctors/ Brokers/Architects/
structural engineers Overseas travel insurance Employees benefit policies ( GPA/GMC)
Insurances which need to
become popular
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TAC was earlier providing the rates, terms policy
wordings and regulations as to how to conduct the business Nearly 70% of the business was in the purview of the
tariff
After liberalising the market by allowing new playersTariff rates had been withdrawn wef 1-1-2007 but with some
limitations From 1-1-2008 it is expected that the policy wordings will
be withdrawn by IRDA which will allow freedom to theinsurers to come out with their policy design wordings
clauses and warranties. The beneficiary will be the customers/ insureds
Detariffing
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Thank You!